Here's the next big Chinese company in huge trouble

Chinese firemen take part in an exercise in Shenyang, the capital of China's northeastern province of Liaoning. REUTERS/China Photo Analysts at investment bank Macquarie reckon they may have identified the next big Chinese company to default: oil-producing giant Honghua.

The analysts now expect Honghua to lose 1 billion yuan ($160.8 million, £106.4 million) in 2015/16 — that's in comparison to the 400 million yuan profit that they previously expected.

Even in Macquarie's bullish case, there's a cash shortfall: Macquarie

Here's Macquarie (emphasis ours):

We continue to see significant default risk for Honghua, and lower our long-term fair equity valuation to zero. That said, we assume Honghua receives some form of external help to support operations and our one-year price target is HK$0.4 with 65% downside. The probability of default for Honghua has been at an elevated level for the past year, and with now a material drop in orders, we estimate a 20-40% probability of default for Honghua.

The stock's value has dropped by about a third in the last six months, during a period in which Hong Kong stocks generally have been surging. It's pinned between the reality of lower oil prices and the Chinese economy's slowdown — not a good place to be.